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Early Winter Boosts Volatility in Natural Gas Pricing: Why Energy Assessment Services Needed

December 5, 2018 by Active Business Services

An earlier – and colder – start to the already lengthy winter season in the northern regions of North America has led to increased volatility in the pricing of natural gas futures, according to a recent report posted on the Natural Gas Intelligence website.

Natural gas futures were recently trading higher, with forecast heating demand gains setting the stage for volatile trading for the contract going forward.

Below Normal Temperatures

Bespoke Weather Services said colder trends expected in early December have resulted in an increase in its gas-weighted degree day (GWDD) forecast.

“Additionally, Canadian guidance and to a lesser extent American guidance decreased long-range warm risks slightly, though they still showed an overall pattern progression that met expectations and indicated a rapid fall-off in GWDDs beyond Dec. 10,” Bespoke said.

Temperatures across Southern Ontario and the U.S. Northeast are expected to remain colder-than-normal in the near term, providing some support for decreasing natural gas storage levels and rising prices.

It’s important to note that natural gas prices for the winter have increased nearly 30% since the beginning of November. Low storage levels caused by colder-than-normal weather is one of the driving forces behind the increase.

The price rise has so far only impacted the December 2018 to March 2019 period, with pricing starting in April 2019 mostly unaffected by the recent market movement.

Active Business Services notes that a recent natural gas storage report showed a significant decline in storage levels: a reduction of about 134 billion cubic feet, which was 18% above analyst predictions. Storage levels are nearly 19% below their five-year average.

However, current utility pricing has not been factored into the near-term natural gas price swing, so it’s likely that utilities will start increasing their prices on Jan. 1, 2019. Industry insiders suggest that it’s best to advise clients of the coming increase sooner, rather than after costs rise.

Energy Assessment and Management Services

Active Business Services’ energy assessment services provide business customers with the ability to spread risk across various hedging strategies rather than absorb all the risk with a single supply arrangement.  This is particularly important in volatile price conditions. Active Business Services also offers full-service solutions that range from portfolio management, nominations, reporting, invoicing, and asset optimization.

Cold weather is a fact of life for Canadians. But, Active Business Services can help businesses effectively manage risk with proven diversified strategies.

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Active Business Services is an energy management firm that has dedicated the last fifteen years to providing Canadian commercial and industrial customers with natural gas and electricity supply and risk management solutions.

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